Your only real recourse to block MS along with all the other privacy invading corporations is to use dnscrypt and a hardware firewall. Use those tools to both log and block domains.
First and foremost, for your browser, do use the extension ublock origin.
To get a hint of what is going on, place a network sniffer between any machine and your gateway. It is an eye opener. Far too many companies have been caught abusing user privacy in the most profound, egregious manners. Windows will not honor your firewall settings nor your host file settings; it will ignore them and pass what it wants right on through. For Microsoft, my assumption is Windows logs every action and every file on a machine and reports back to a central MS server. For files, a safe assumption is metadata such as filename, filedates, unique hash value, size, location, etc... is reported.
PS: If you ever peel the top layers off windows and look under the hood, you would be absolutely shocked at all the user activity logging that is done by Windows.